As expected, RBA Governor Glenn Stevens and his men decided to keep interest rates on hold at 2.50% in their latest policy statement. What else did they announce and how could it affect the Aussie’s forex price action?
1. No monetary policy changes for a long while?
Not only did RBA policymakers refrain from making policy adjustments in this particular statement, but they also emphasized that there would be no changes for quite some time. RBA head Stevens repeated that the most prudent course for now was to have a period of stability in interest rates.
Bear in mind that concerns about a potential housing bubble have been popping up recently, with a few economic experts urging the RBA to introduce tightening measures to cool asset prices down. The Australian central bank has simply acknowledged that dwelling prices have been rising but stopped short of actually adjusting monetary policy.
2. Economic assessment: Stable with a chance of labor market volatility
Perhaps one of the biggest reasons why the RBA refrained from making tightening moves was that the economy is just beginning to stabilize. Policymakers agreed that the recent economic figures from Australia reflect moderate growth, although performance is still expected to stay below trend for the next few months. In other words, it’s too early to shake things up!
Apart from that, the RBA also noted that jobs data has been “unusually volatile” lately. While there have been some signs of progress in hiring, other labor market indicators such as wage growth reflect a significant amount of spare capacity. The statement also showed that policymakers project that it will take some time before unemployment declines consistently.
3. AUD remains “high by historical standards”
Another area of concern is the Australian dollar’s historically high value, which continues to weigh on commodity prices. Looks like Stevens and his men still aren’t impressed by AUD/USD’s steady depreciation in the past month!
According to the press release, policymakers think that further Aussie depreciation could provide more assistance to achieving a more balanced economic growth. Do you think they’ll take a page off the RBNZ’s book and stage a secret forex intervention as well?
Judging by the tone of their statement, it appears that the RBA would continue to rely on its accommodative monetary policy stance to support the Australian economy rather than introduce new measures. With that, the RBA could be on middle ground compared to other major central banks, which are either open to further easing or taking steps to reduce stimulus.
Where do you see AUD/USD trading by the end of this year? Share your thoughts in our comments section or vote in our poll below!